THE WATER CARRIER ACT, 1935

FRIDAY, MAY 10, 1935

HOUSE OF REPRESENTATIVES,

COMMITTEE ON THE MERCHANT MARINE AND FISHERIES,

Washington, D. C. The committee met at 10 a. m., Hon. Schuyler O. Bland (chairman) presiding.

The CHAIRMAN. Gentlemen, I am again going to request that witnesses having long written statements file them in the record as briefs and that the time of the committee be economized as much as possible. We have a lot of work to do and a lot of witnesses to hear and other bills to consider. I hope you will touch on the salient features and, where you have briefs, file them as a part of the record. However, I do not want to cut anybody off.

I will first call Mr. McClintock, representing the Farmers' National Grain Corporation.

STATEMENT OF J. O. McCLINTOCK, MANAGER CHICAGO BRANCH FARMERS' NATIONAL GRAIN CORPORATION

Mr. MCCLINTOCK. I just have a brief here which I will file.

The CHAIRMAN. Of course briefs will be put into the record just exactly as though they were written statements. I am not going to shut anybody off, but simply ask that you economize the time of the committee.

Mr. MCCLINTOCK. I will just say then, Mr. Chairman, I am manager of the Farmers' National Grain Corporation, Chicago Division. The Farmers' National Grain Corporation is the sales agent of some 27 State regional cooperatives representing an affiliated membership of some 300,000 producers and approximately that many nonmember producers.

I want to make it plain that we are not supporting waterways nor fighting the railroads; we are merely endeavoring to maintain and enlarge the avenues of transportation and make them as cheap as possible for the benefit of the producer. We are opposed to extending authority affecting water transportation to the Interstate Commerce Commission, for some reasons stated in my brief.

The CHAIRMAN. Cannot you summarize briefly the reasons, so that we can have the benefit of them?

Mr. MCCLINTOCK. The grain producers are opposed to any plan of coordination which will have the effect of hampering or in any way obstruct the fulfillment of their intent to market their products in the most economical way. Coordination is opposed in the belief that such action will be a restraint on an undeveloped and needed mode of transportation, namely, water transportation. Opposition is fur

ther justified by the proposition that the aid provided water transportation by nature makes this system of transportation incomparable with man-made systems and, therefore, should not be viewed from the same perspective in matters of rate making.

Coordination of water and rail transportation is opposed because there are fundamental conditions related to the peculiar nature of water transportation which are absolutely foreign to circumstances surrounding rail transportation. Therefore an attempt to blend operations of these two systems of such varied origin and development would result in the elimination of water transportation.

We believe in a country as large as ours there is room and need for various systems of transportation operating independently and capable of adjusting themselves suitably to conform to the peculiarities and needs of the areas served. The grain producers are apprehensive that coordination means the elimination of certain benefits now obtainable through water transportation. The Coordinator's statement to the effect that an increase in water rates is desirable gives credence to such a conclusion.

The grain producers believe that coordination of all systems of transportation under one authoritative body possesses dangers which will have the effect of destroying water development and the benefits derived therefrom. Inland river navigation is still in its infancy as far as grain producers are concerned. They feel that no progress can be accomplished in developing water transportation if tied to another system of transportation which, at best, is standing still.

I will just say briefly, Mr. Chairman, it is our belief that water development should be allowed to seek its own place in the transportation, unhampered, and without rigid regulations, the same as the railroads were permitted to do in their days of development. We believe there is much good for the producer that can come from the further development of our inland-waterway systems and we fear that this development will be delayed, if not even entirely denied, under a regulatory system where it is hooked up with other systems of transportation. We think, if coordination is desirable and they all should be put under one authoritative body, that the Commission should at least be enlarged and people who have an interest in the development of the waterways should be represented on that Commission.

The CHAIRMAN. First, you are opposed to putting them under the Interstate Commerce Commission?

Mr. MCCLINTOCK. Yes, that is right.

The CHAIRMAN. Then, if they are going to be put under the Interstate Commerce Commission, you want an Interstate Commerce Commission that is not composed entirely of people who have been studying railroad problems all the time.

Mr. MCCLINTOCK. Absolutely.

The CHAIRMAN. And who are thoroughly railroad-minded?

Mr. MCCLINTOCK. That is right; that is the way we feel about it. The CHAIRMAN. The evidence before this committee has shown that in the past the efforts of the Commission have been rather to favor the railroads as against the water carriers.

Mr. MCCLINTOCK. We feel that way.

The CHAIRMAN. And the appropriations for the waterways throughut the country granted by Congress have been usually predicated

upon the statement that the development of those waterways was going to afford the people of the country a cheaper form of transportation.

Mr. MCCLINTOCK. That is absolutely right. We feel that putting the inland waterways system or any waterways system under the authority of the present Interstate Commerce Commission will have the effect not only of losing the benefits that have already been derived, but any further benefit that lays in the undeveloped water

ways.

The CHAIRMAN. I think it is possibly true the railroad commission has gradually grown and gotten so technical in its regulations and restrictions upon the railroads that a large part of the trouble with the railroads now comes from too much regulation by the Interstate Commerce Commission.

Mr. MCCLINTOCK. I think the history of the railroads will disclose the fact that the railroads made their greatest progress and reached their highest state of efficiency in days of nonregulation.

The CHAIRMAN. And we hear so much now about the high salaries that are being paid: Do not you think it is about time the railroads gave a little attention to the reduction of the high salaries being paid to the presidents of the railroads and those higher officials when it is really the clerks in the office who are doing the job?

Mr. MCCLINTOCK. I should think so.

The CHAIRMAN. Is not that the first essential for the railroadsthe consideration of economies in their own operations? Mr. MCCLINTOCK. I think so.

With that, I will just file the brief and I have made some references here which I will support by documents and file them with the secretary.

The CHAIRMAN. They will be incorporated in the record and can be made a part of the hearing. If there is any other high point in your general statement that you want to make reference to, we will be very glad to hear you.

Mr. MCCLINTOCK. Mr. Cahirman, that about covers it. First, we are opposed to regulating the water transportation, believing that it is still in its infancy and won't stand rigid regulation; that it will interfere with its development and the development that is badly needed. Then we take the position, if we are going to have regulation, it should be done by a body that has not been under the influence and whose experience has not been entirely with the railroads. The CHAIRMAN. I understnad you represent a grain corporation. Is that made up generally of farmers?

Mr. MCCLINTOCK. It is. It is owned and controlled by farmers. The CHAIRMAN. Extending throughout the country?

Mr. MCCLINTOCK. All over the United States.

The CHAIRMAN. All over the United States?

Mr. MCCLINTOCK. In every place where grain is produced.

The CHAIRMAN. What is its operation?

Mr. MCCLINTOCK. Our main office is in Chicago.

The CHAIRMAN. Well, do they sell to the grain corporation, or is it a corporation of associations, or what?

Mr. MCCLINTOCK. The Farmers' National is owned by State regionals, as we call them. The State regionals are made up of the local elevators and producers in the territory where they are located.

They in turn own the Farmers' National; they elect a board of directors.

The CHAIRMAN. So you are speaking pretty generally for the farmers?

Mr. MCCLINTOCK. Yes. There are some 300,000 affiliated farmers identified with the organization (and when I say "farmers" I am talking about grain producers), and there are some 200,000 that participate in our activities who are not affiliated members. So we have a representation of some 500,000 grain producers in our organization.

(The memoranda submitted for the record by Mr. McClintock are as follows:)

REMARKS MADE IN OPPOSITION TO ENACTMENT OF LEGISLATION AS PROVIDed FOR IN H. R. 5379

My name is J. O. McClintock. I am manager of the Chicago branch of Farmers National Grain Corporation. My remarks are intended to express the viewpoint of organized grain producers for whom the Farmers National Grain Corporation acts as sales agent. The public's interest is so allied with that of agriculture we believe it proper to state that speaking in behalf of agriculture, is, in effect, speaking in the interest of the general public. This reference is made since the Coordinator repeatedly emphasizes and makes clear that the provisions of the bill now under consideration are drawn to conform to the public's interest.

We are opposed to extending authority affecting water transportation to the Interstate Commerce Commission for reasons hereinafter stated.

It is quite commonly known that grain-producing areas located adjacent or near to navigable inland streams are receiving a benefit from water transportation service that cannot practically be extended by any other system of transportation. I shall refer first to the movement of grain from the Illinois River Valley to the Pacific Coast and to other consuming centers including world markets. Inland water transportation to any appreciable extent was not available direct from important grain-producing areas until about 3 years ago when the Illinois River was opened for navigation. Prior to that time, such service had been mainly from points of accumulation to terminal market centers. The opening of the Illinois River for navigation had the effect of providing new and needed markets for one of the largest surplus-grain producing areas in the United States.

Soon after the Illinois River was made available for navigation the Farmers National Grain Corporation in behalf of the producers took the initiative in developing the new markets made available by this new system of transportation. Operations were started first at Havana, Mason County, Ill. Mason County, according to figures made available by the United States Department of Agriculture, produced on a 3-year average, 1929-31, slightly in excess of 21⁄2 million bushels of corn annually. According to figures including the same years, there was shipped out of the county annually 67 percent of the amount produced. During our fitst year's operation we moved in amount of corn out of Havana approximate in quantity to the surplus represented by 67 percent of 21⁄2 million bushels. Not a bushel of corn so moved went to points of accumulation commonly known as primary markets. This corn moved directly from this very large surplus-producing area to points of consumption, such as the Pacific Coast, via New Orleans and the Panama Canal, lower Mississippi Valley locations, and foreign ports. Had we been dependent on reaching these new markets by rail transportation, especially foreign markets, little, if any, of this same corn would have moved to the points mentioned.

Our first year's experience fully convinced us that the employment of inland water transportation direct from points of production offered invaluable service to grain producers. It was demonstrated that producers could be paid more money for their corn without adding to the cost to the consumer. In fact, many instances shows higher prices to producers and lower costs of the consumers. This direct benefit in dollars and cents is very important, but the most effective accomplishment and the one we wish most to emphasize comes through the fact that water transportation makes it possible to transport grain from surplus locations where it is least needed and where its presence becomes a menace to general price levels to points where most needed and where its presence is market

wise least depressive. The importance of this feature of water transportation becomes apparent when you study the grain producing areas that are served or can be served by navigable inland streams. If production figures on corn in the State of Illinois are consulted, they will disclose that counties adjacent or next adjoining the Illinois River produce a surplus perhaps unequalled by any similar area in the United States.

Within an area confined to a 50-mile radius of the Illinois River, millions of bushels of surplus corn and other grains are produced. For example, Mason County, according to records heretofore referred to and based on the average during years previously mentioned, produces 21⁄2 million bushels of corn annually with a surplus of 67 percent of the amount produced. Tazewell County had a production of 4 million, of which 51 percent was surplus. McLean County, next adjoining, produced 114 million, of which 59 percent was surplus. La Salle County, cut in half by the Illinois River, produced 104 million, of which 58 percent was surplus. Livingston County, next adjoining, produced 101⁄2 million bushels, of which 71 percent was surplus. Other counties compare similarly.

These figures are astonishing when consideration is given to the fact that on an average, less than 20 percent of this country's annual corn production leaves the farm in the form of corn. Obviously, the surplus created in this very large producing area requires much attention that it may not become a depressing influence on general price levels, thereby affecting the value of all corn regardless of where it is produced. The employment of water transportation to its fullest possibilities will prevent the accumulation of this surplus corn in stagnant centers of mass accumulation, thereby avoiding effects of centralized pressure.

Our action in pioneering this mode of marketing resulted in others following. Our own volume was increased the second year; totals of all were more than doubled. Elevator facilities to further increase this volume are being acquired and constructed by others as well as ourselves. Our goal is to market 15 to 20 million bushels of corn annually direct from points of surplus production along the Illinois River to markets less accessible by railroads. Similar plans are in mind for other areas that can be given the advantage of water transportation. Peculiarly, a great many important surplus producing areas are favorably located to have the advantage of water transportation. Reference is made to the possibilities existing under navigable conditions of the Missouri River. In its course across the State of Missouri this river passes through and near a number of counties producing important surplus quantities of grain. In its continuance to Omaha it borders surplus producing counties in the States of Nebraska and Iowa. When such navigation is made available, the areas mentioned will be extended the benefits it is now possible for the producers in the Illinois River Valley to obtain.

The grain producers are opposed to any plan of coordination which will have the effect of hampering or in any way obstruct the fulfillment of this purpose. Coordination is opposed in the belief that such action will be a restraint on an undeveloped and needed mode of transportation. Opposition is further justified by the proposition that the aid provided water transportation by Nature makes this system of transportation incomparable with man-made systems and, therefore, should not be viewed from the same perspective in matters of rate making. Coordination of water and rail transportation is opposed because there are fundamental conditions related to the peculiar nature of water transportation which are absolutely foreign to circumstances surrounding rail transportation. Therefore, an attempt to blend operations of these two systems of such varied origin and development would result in the elimination of water transportation.

Had coordination of transportation systems been made effective in our early days of development, it is conceivable that we would have the stage coach and pony express with us today and railroads would have been correspondingly retarded in development. Undoubtedly, railroad development made its greatest progress and furthered the Nation's growth and expansion most when unresstrained. It is believed that water transportation will likewise develop in a comparable manner if allowed to proceed without rigid regulation.

In a country as large as ours there is room and need for various systems of transportation operating independently and capable of adjusting themselves suitably to conform to the peculiarities and needs of the areas served. The grain producers are apprehensive that coordination means the elimination of certain benefits now obtainable through water transportation. The Coordinator's statement to the effect that an increase in water rates is desirable gives credence to such a conclusion.